By: Julie Johnsson & Mark Chediak |
The chief executive officer of Energy Future Holdings Corp.’s Oncor utility received $20 million last year, nearly three times the compensation paid to parent company CEO John Young.
Pay to Robert Shapard, chairman and CEO of the Oncor Electric Delivery Co. unit, rose eightfold from $2.4 million in 2011 after the utility’s board made an early payment of awards from an equity incentive program. Shapard received $18.5 million of the $64 million paid to Oncor directors and executives from the November payout, according to a filing today.
Energy Future awarded Young $6.77 million in salary and incentives in 2012, down from $15.1 million a year earlier, according to a regulatory filing by the Dallas-based company today. Young’s 2011 pay included a $5.4 million one-time gain when stock options were converted to restricted units, Allan Koenig, an Energy Future spokesman, said in a phone interview.
“The management team has performed at a superior level, despite persistently low commodity, wholesale and power prices which have had an impact across our industry and business,” said Koenig.
Energy Future, the Texas power plant owner taken private in the biggest leveraged buyout in history, reported a $1.95 billion fourth-quarter loss today that was more than 10-fold greater than its $136 million loss a year earlier, according to its filing. Moody’s Investors Service expects it to file for a restructuring within the next 12 months, according to a report published Feb. 4.
Energy Future owns 80 percent of Oncor, a regulated power- line business that delivers electricity to more than 3 million Texas homes and businesses. The utility operates under a board with a majority of independent directors as part of a structure that is intended to shield it from any corporate reorganization by its parent.
Shapard’s total compensation including long-term awards is at the median of executive compensation for utility peers when divided over five years, Chris Schein, a spokesman for Oncor, said in a telephone interview.
“The long-term incentive program was structured on a five- year basis that was earned over that time frame and paid out at the end 2012 after board approval in November,” said Schein. None of the long-term incentive payments are included in customer rates and they are fully funded by shareholders, he said.
Letters of Credit
Energy Future also provided letters of credit that would guarantee Young and Mark “Mac” McFarland, the new head of its Luminant power plant unit, paydays of $9.6 million and $4.3 million, respectively, if they stay on the job through 2015, the company said in the filing.
Letters of credit can’t be rescinded if the company seeks bankruptcy protection, said Douglas Baird, a University of Chicago law professor. Ailing companies are circumventing 2005 federal bankruptcy code restrictions on pay and perks by squaring away incentives well before they land in court, Baird said in a phone interview before the filing was made.
“The executive knows it’s as good as secure — he gets paid,” Baird added. While creditors may challenge those payments in bankruptcy, “possession is nine-tenths of the law.”
Incentive awards granted under the letters of credit are earned based on performance targets and goals similiar to other executive compensation, Koenig said.